Clarity needed over MNOs 70% stake in DNB, say fund managers

Sunday 05 May 2024

KUALA LUMPUR (March 16): While the government has finally announced its decision to proceed with the single wholesale network (SWN) model for the nation’s 5G rollout plan, fund managers said more clarity is needed over how this would actually be implemented.

At a press conference on Wednesday (March 16), Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz unveiled a modified version of the SWN model, which will see a 70% stake in Digital Nasional Bhd offered to mobile network operators (MNOs) in the country, to be completed by the end of June 2022.

He said the move was to “encourage public-private partnership” in the rollout and that it demonstrates the government’s firm stance on policy continuity.

Several MNOs had previously mooted for a dual wholesale network model instead, citing concerns over competitiveness and continued investment and innovation of products and services in the sector.

Areca Capital CEO Danny Wong pointed out that the granting of the 70% equity stake will still be subject to further negotiations, and that full details of the government's latest announcement have yet to be revealed.

“We don’t know who gets how much [of the equity stake] and at what price. And how would they make it as fair as possible? Is each MNO going to be entitled to the same amount of shares, and would the price be the same for all MNOs, which may have different capacity requirements?” he questioned.

Meanwhile, an analyst said the decision to grant equity to the MNOs was somewhat expected, as the government needs the support of the telcos for the rollout. Nevertheless, he noted that there were expectations that the government would opt for the DWN model instead.

However, the analyst said the involvement of many parties in DNB could result in potential delays in the 5G development and rollout, and questioned how the roles of DNB and the MNOs would be split.

“When there are so many parties involved, there could be disagreements, which can cause delays and might even lead to cost overruns,” said the analyst.

While more clarity is needed, the market reacted positively to the news, with telco counters marking gains across the board following the government’s announcement of the new SWN model.

At 5pm, Maxis Bhd closed 11 sen or 2.7% higher at RM4.19, while Digi.com Bhd rose seven sen or 1.8% to RM4.01.

Axiata Group Bhd ended the day four sen or 1.1% higher at RM3.80, TIME dotCom Bhd increased one sen or 0.2% to RM4.12, while Telekom Malaysia Bhd settled six sen or 1.2% higher at RM4.92.

Fortress Capital Asset Management CEO Thomas Yong said the announcement was mildly positive for the telecommunications sector, given concerns shared among industry players that a single state-run network could hinder competition.

“Offering a 70% stake in DNB to the MNOs at the initial stage should alleviate concerns over pricing and transparency issues. This will allow the MNOs to have better participation in the roll-out plan.

“The exact impact on the telecommunication sector would depend on the eventual wholesale agreement between DNB and the telcos. Nevertheless, finalisation of the framework should remove some overhang of the sector,” Yong added.

Edited ByTan Choe Choe

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